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Private Label: How to Provide Differentiation in a 13-SEER Commoditized World

Scott Robinson | Oct 01, 2005

For private label contractors, putting our own label on the equipment we sell and install fits into a larger strategy of self-branding and strengthening relationships with customers.

When a private label contractor meets with the customer, the conversation is about how the contractor will take responsibility for the performance of a system – much more than a box – and the customer's satisfaction with the experience. Instead of focusing the attention on who manufactured the equipment, you focus on customer needs and system performance.

The contractors who would be most likely to benefit from a private label program are mature companies with significant brand equity in their market. They also need to have a good reputation for quality installations and satisfied customers.

At the same time, private label contractors can change equipment manufacturers without changing the brand, the advertising, or the sales literature.

What's in a Brand?A strong brand means much more than name recognition, a color scheme, or a logo. It's everything the consumer associates with a product or company.

For a contractor with a great reputation for quality, integrity, and commitment to customer satisfaction, their "brand" translates into a customer expectation.

So which is more important, the manufacturer's brand or the contractor's brand? Some would argue that a partnership of both brands is the winning combination.

Manufacturers have a great deal riding on their brand equity. Who would blame them for feeling their brand is paramount to the best system?

However, there are a growing number of contractors who are successful with private label programs promoting only their own brand.

For these contractors, the brand goes beyond the equipment, and extends to the entire experience the customer has with the contracting company, including system performance and customer service.

When successful, a strong brand deepens the relationship with the customer, and facilitates sales of accessories and services such as service agreements, indoor air quality products, and much more.

It Ain't a BuickOne of the problems contractors face in the sales process is when some customers use what I call the "buying a Buick" method to shop. This is when a homeowner uses a process identical to purchasing an automobile when purchasing an air conditioner.

The process works like this: Do some research to identify which car model best suits my needs. Find a dealer who sells this product. Negotiate the best possible price.

In their own way, manufacturers support this method of buying HVAC equipment. They do their best to build innovative, reliable, efficient air conditioners and feel if they can tell their story well enough, the consumer will pick their product. Then it's a simple matter of the consumer finding a dealer who will complete the transaction and install the air conditioner.

This model works well for automobiles. However, it has serious flaws when the product is an air conditioner, rather than a Buick.

For starters, the car is delivered to the consumer essentially the same as the dealer received it from the factory. They prep the car by cleaning it and filling it with gas, and the car is ready.

On the other hand, air conditioners and other HVAC products are incorporated as part of a system. The "dealer" (I prefer the term contractor) has whole-system responsibility. This includes:

Customer needs assessment

Building evaluation

Load calculation

Duct system responsibility

Code compliance and permits

Electrical supply responsibility

Fuel supply responsibility

Venting safety responsibility

Equipment selection

Installation quality responsibility

System start-up, balancing, and commissioning

Customer record retention

Warranty service

Ongoing maintenance and repair

Add-on products (IAQ)

I feel it does the consumer a disservice when we as an industry teach the consumer to select their contractor based on the brand of equipment, instead of the quality and performance of the system.

It encourages consumers to think of the installation as a commodity. To the degree the consumer believes our offerings are commodities, they will think the best value is the lowest price.

This tendency may increase with the introduction of 13 SEER as a minimum efficiency.

The Essential IngredientsThere are several parts of a successful private label program.

A great wholesale distributor partner is a must. The distributor must be committed to the program's success. This involves keeping adequate inventories in place, helping the contractor with the equipment labels and literature, and assisting with training and warranty administration.

The contractor must be of sufficient size and maturity for the program to work. Volume is important to meet the expectations of the distributor. Maturity is critical because the contractor must have sufficient brand equity in the market for the concept to work.

The contractor must be able to change. Many contractors have a mutually beneficial relationship with their major name equipment brand. However, for some, it's a crutch—real or imagined.

Some contractors feel they need the association with well-known brand equipment to succeed. Many are convinced the consumer buys from them because they're a dealer for a particular brand (just like a Buick).

They may feel they need the benefits of being part of an elite dealer group or the support of co-op funds.

In addition, employees may not be receptive to a brand change, or may feel the loss of the brand equity of the major name they helped build is too valuable to let go.

Private label programs certainly aren't for everyone. However, if you already have a strong conviction that "your company is the brand," becoming a private label contractor just might be for you.

This article is based on the presentation, Private Labeling: How it Benefits Contractors in A Commodity World, which Scott Robinson gave at HVAC Comfortech 2005, held in Nashville, TN, Sept. 14-17, 2005. For more information about HVAC Comfortech 2006, which will be held September 13-16 in Baltimore, MD, call 216/931-9550.

Learn from the leaders: In 2005, HVAC Comfortech presented more than 30 speakers providing educational seminars. All the sessions were recorded, and are available for purchase. For pricing and ordering information, visit the show website: www.hvaccomfortech.com

Scott Robinson is president of Apple Heating & Cooling in Ashtabula, OH. He can be reached at 440/997-1212 or at [email protected]